ROSS STORES INC

Previous wording

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,795 locations in 43 states, the District of Columbia, and Guam, as of August 3, 2024. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 353 dd’s DISCOUNTS stores in 22 states as of August 3, 2024 that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Current wording

Ross Stores, Inc. operates two brands of off-price retail apparel and home fashion stores—Ross Dress for Less® (“Ross”) and dd’s DISCOUNTS®. Ross is the largest off-price apparel and home fashion chain in the United States, with 1,836 locations in 43 states, the District of Columbia, and Guam, as of November 2, 2024. Ross offers first-quality, in-season, name brand and designer apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 60% off department and specialty store regular prices every day. We also operate 356 dd’s DISCOUNTS stores in 22 states as of November 2, 2024 that feature a more moderately-priced assortment of first-quality, in-season, name brand apparel, accessories, footwear, and home fashions for the entire family at savings of 20% to 70% off moderate department and discount store regular prices every day.

Previous wording

The following table summarizes our financial results for the three and six month periods ended August 3, 2024 and July 29, 2023:

Current wording

The following table summarizes our financial results for the three and nine month periods ended November 2, 2024 and October 28, 2023:

Previous wording

The following table summarizes the stores opened and closed during the three and six month periods ended August 3, 2024 and July 29, 2023:

Current wording

The following table summarizes the stores opened and closed during the three and nine month periods ended November 2, 2024 and October 28, 2023:

Previous wording

Sales for the six month period ended August 3, 2024 increased $716.0 million, or 7.6%, compared to the six month period ended July 29, 2023, primarily due to the opening of 87 net new stores between July 29, 2023 and August 3, 2024 and a 3% comparable store sales increase.

Current wording

Sales for the nine month period ended November 2, 2024 increased $862.5 million, or 6.0%, compared to the nine month period ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024 and a 3% comparable store sales increase.

Previous wording

Our sales mix for the three and six month periods ended August 3, 2024 and July 29, 2023 is shown below:

Current wording

Our sales mix for the three and nine month periods ended November 2, 2024 and October 28, 2023 is shown below:

Previous wording

Cost of goods sold. Cost of goods sold for the three month period ended August 3, 2024 increased $222.6 million compared to the three month period ended July 29, 2023, primarily due to the 4% comparable store sales increase and higher sales from the opening of 87 net new stores between July 29, 2023 and August 3, 2024, partially offset by lower distribution costs and lower buying costs primarily due to lower incentive compensation expense.

Current wording

Cost of goods sold. Cost of goods sold for the three and nine month periods ended November 2, 2024 increased $70.0 million and $490.6 million, respectively, compared to the three and nine month periods ended October 28, 2023, primarily due to higher sales from the opening of 80 net new stores between October 28, 2023 and November 2, 2024, and the respective 1% and 3% comparable store sales increases, partially offset by lower buying costs primarily due to lower incentive compensation expense, lower distribution costs, and lower domestic freight costs.

Previous wording

Cost of goods sold as a percentage of sales for the three month period ended August 3, 2024 decreased approximately 60 basis points compared to the three month period ended July 29, 2023, primarily due to a 70 basis point decrease in distribution costs, a 55 basis point decrease in buying costs primarily due to lower incentive compensation expense, and a 15 basis point decrease in domestic freight costs. Partially offsetting these items was an 80 basis point decrease in merchandise margin, primarily due to our continued efforts to offer more sharply priced branded bargains.

Current wording

Cost of goods sold as a percentage of sales for the three month period ended November 2, 2024 decreased approximately 70 basis points compared to the three month period ended October 28, 2023, primarily due to a 65 basis point decrease in buying costs mainly due to lower incentive compensation expense, a 50 basis point decrease in distribution costs, and a 40 basis point decrease in domestic freight costs. Partially offsetting these items was a 60 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 25 basis point increase in occupancy costs.

Previous wording

Cost of goods sold as a percentage of sales for the six month period ended August 3, 2024 decreased approximately 100 basis points compared to the six month period ended July 29, 2023, primarily due to a 75 basis point decrease in distribution costs, a 55 basis point decrease in buying costs primarily due to lower incentive compensation expense, and a 20 basis point decrease in domestic freight costs. Partially offsetting these items was a 50 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains.

Current wording

Cost of goods sold as a percentage of sales for the nine month period ended November 2, 2024 decreased approximately 90 basis points compared to the nine month period ended October 28, 2023, primarily due to a 65 basis point decrease in distribution costs, a 60 basis point decrease in buying costs mainly due to lower incentive compensation expense, and a 30 basis point decrease in domestic freight costs. Partially offsetting these items was a 55 basis point decrease in merchandise margin primarily due to our continued efforts to offer more sharply priced branded bargains and a 10 basis point increase in occupancy costs.

Previous wording

We expect lower incentive compensation expense, domestic freight costs, and distribution costs as a percentage of sales to continue through the remainder of fiscal 2024, offset by lower merchandise margins as we build on our efforts to offer more sharply priced branded bargains throughout our stores.

Current wording

In fiscal 2024, we expect lower distribution costs, domestic freight costs, and incentive compensation expense as a percentage of sales, partially offset by lower merchandise margins as we continue to build on our efforts to offer more sharply priced branded bargains throughout our stores.

Previous wording

Selling, general and administrative expenses. For the three and six month periods ended August 3, 2024, selling, general and administrative expenses (“SG&A”) increased $28.5 million and $58.5 million, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to the opening of 87 net new stores between July 29, 2023 and August 3, 2024.

Current wording

Selling, general and administrative expenses. For the three and nine month periods ended November 2, 2024, selling, general and administrative expenses (“SG&A”) increased $22.4 million and $80.9 million, respectively, compared to the three and nine month periods ended October 28, 2023, primarily due to the opening of 80 net new stores between October 28, 2023 and November 2, 2024, partially offset by lower incentive compensation expense.

Previous wording

SG&A as a percentage of sales for the three and six month periods ended August 3, 2024 decreased 55 and 60 basis points, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to higher sales and lower incentive compensation expense.

Current wording

SG&A as a percentage of sales for the three month period ended November 2, 2024 decreased 5 basis points compared to the three month period ended October 28, 2023, primarily due to lower incentive compensation expense.

Previous wording

We expect lower incentive compensation expense as a percentage of sales to continue through the remainder of fiscal 2024.

Current wording

We expect lower incentive compensation expense as a percentage of sales to continue through fiscal 2024.

Previous wording

Interest income, net. For the three and six month periods ended August 3, 2024, interest income, net increased $6.1 million and $20.7 million, respectively, compared to the three and six month periods ended July 29, 2023, primarily due to increased interest income from higher interest rates and higher cash balances.

Current wording

For the nine month period ended November 2, 2024, interest income, net increased $19.9 million compared to the nine month period ended October 28, 2023, primarily due to increased interest income from higher interest rates and higher average cash balances.

Previous wording

The table below shows the components of interest income, net for the three and six month periods ended August 3, 2024 and July 29, 2023:

Current wording

The table below shows the components of interest income, net for the three and nine month periods ended November 2, 2024 and October 28, 2023:

Previous wording

Taxes on earnings. Our effective tax rate for the three month periods ended August 3, 2024 and July 29, 2023 was approximately 25%. Our effective tax rate for the six month periods ended August 3, 2024 and July 29, 2023 was approximately 24%. Our effective tax rate is impacted by changes in tax laws and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Current wording

Taxes on earnings. Our effective tax rate for the three and nine month periods ended November 2, 2024 was approximately 24%, compared to approximately 25% for the three and nine month periods ended October 28, 2023. Our effective tax rate is impacted by changes in tax laws and accounting guidance, location of new stores, level of earnings, tax effects associated with stock-based compensation, and the resolution of tax positions with various tax authorities.

Previous wording

Net earnings. Net earnings as a percentage of sales for the three month periods ended August 3, 2024 and July 29, 2023 were 10.0% and 9.0%, respectively. Net earnings as a percentage of sales for the three month period ended August 3, 2024 were higher primarily due to lower cost of goods sold and lower SG&A expenses.

Current wording

Net earnings. Net earnings as a percentage of sales for the three month periods ended November 2, 2024 and October 28, 2023 were 9.6% and 9.1%, respectively. Net earnings as a percentage of sales for the three month period ended November 2, 2024 were higher primarily due to lower cost of goods sold and lower SG&A expenses, partially offset by lower interest income.

Previous wording

Net earnings as a percentage of sales for the six month periods ended August 3, 2024 and July 29, 2023 were 10.0% and 8.7%, respectively. Net earnings as a percentage of sales for the six month period ended August 3, 2024 were higher primarily due to lower cost of goods sold, lower SG&A expenses, and higher interest income.

Current wording

Net earnings as a percentage of sales for the nine month periods ended November 2, 2024 and October 28, 2023 were 9.9% and 8.8%, respectively. Net earnings as a percentage of sales for the nine month period ended November 2, 2024 were higher primarily due to lower cost of goods sold, lower SG&A expenses, and higher interest income.

Previous wording

Earnings per share. Diluted earnings per share for the three month period ended August 3, 2024 was $1.59, compared to $1.32 for the three month period ended July 29, 2023. Diluted earnings per share for the six month period ended August 3, 2024 was $3.05, compared to $2.41 for the six month period ended July 29, 2023.

Current wording

Earnings per share. Diluted earnings per share for the three month period ended November 2, 2024 was $1.48, compared to $1.33 for the three month period ended October 28, 2023. Diluted earnings per share for the nine month period ended November 2, 2024 was $4.53, compared to $3.74 for the nine month period ended October 28, 2023.

Previous wording

The $0.27 increase in the diluted earnings per share for the three month period ended August 3, 2024 was primarily attributable to an 18% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program. The $0.64 increase in the diluted earnings per share for the six month period ended August 3, 2024 was primarily attributable to a 24% increase in net earnings and a 3% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.

Current wording

The $0.15 increase in the diluted earnings per share for the three month period ended November 2, 2024 was primarily attributable to a 9% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program. The $0.79 increase in the diluted earnings per share for the nine month period ended November 2, 2024 was primarily attributable to a 19% increase in net earnings and a 2% reduction in weighted-average diluted shares outstanding largely due to stock repurchases under our stock repurchase program.

Previous wording

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under active stock repurchase programs, pay dividends, and repay debt as it becomes due.

Current wording

The primary sources of funds for our business activities are cash flows from operations and short-term trade credit. Our primary ongoing cash requirements are for merchandise inventory purchases, payroll, operating and variable lease costs, taxes, capital expenditures related to new and existing stores, and investments in distribution centers, information systems, and buying and corporate offices. We also use cash to repurchase stock under active stock repurchase programs, pay dividends, and repay debt as it becomes due. In September 2024, we repaid at maturity the$250 million principal amount of the 3.375% Senior Notes. As of November 2, 2024, we had $700 million principal amount of 4.600% Senior Notes that will reach maturity in 2025.

Previous wording

Net cash provided by operating activities was $961.0 million for the six month period ended August 3, 2024. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation, partially offset by the payment of fiscal 2023 incentive bonuses. Net cash provided by operating activities was $1.1 billion for the six month period ended July 29, 2023. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation.

Current wording

Net cash provided by operating activities was $1.5 billion for the nine month period ended November 2, 2024. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation, partially offset by the payment of fiscal 2023 incentive bonuses. Net cash provided by operating activities was $1.6 billion for the nine month period ended October 28, 2023. This was primarily driven by net earnings excluding non-cash expenses for depreciation, amortization, and stock-based compensation.

Previous wording

The decrease in cash flow provided by operating activities for the six month period ended August 3, 2024 compared to the same period in the prior fiscal year was primarily driven by higher incentive compensation payments and lower accounts payable leverage (defined as accounts payable divided by merchandise inventory), partially offset by higher net earnings.

Current wording

The decrease in cash flow provided by operating activities for the nine month period ended November 2, 2024 compared to the same period in the prior fiscal year was primarily driven by higher incentive compensation payments and lower accounts payable leverage (defined as accounts payable divided by merchandise inventory), partially offset by higher net earnings.

Previous wording

Accounts payable leverage was 89% and 94% as of August 3, 2024 and July 29, 2023, respectively. The decrease in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

Current wording

Accounts payable leverage was 82% and 87% as of November 2, 2024 and October 28, 2023, respectively. The decrease in accounts payable leverage was primarily due to the timing of inventory receipts and related payments versus last year.

Previous wording

Changes in packaway inventory levels impact our operating cash flow. As of August 3, 2024, packaway inventory was 39% of total inventory, compared to 40% at the end of fiscal 2023.

Current wording

Changes in packaway inventory levels impact our operating cash flow. As of November 2, 2024, packaway inventory was 38% of total inventory, compared to 40% at the end of fiscal 2023.

Previous wording

Net cash used in investing activities was $333.7 million and $363.5 million for the six month periods ended August 3, 2024 and July 29, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to build, expand, and improve distribution centers, to open new stores and improve existing stores, and for various other expenditures related to our information technology systems and buying and corporate offices.

Current wording

Net cash used in investing activities was $514.1 million and $540.5 million for the nine month periods ended November 2, 2024 and October 28, 2023, respectively, and was related to our capital expenditures. Our capital expenditures include costs to open new stores and improve existing stores, to build, expand, and improve distribution centers, and for various other expenditures related to our information technology systems and buying and corporate offices.

Previous wording

The decrease in cash used in investing activities for the six month period ended August 3, 2024, compared to the same period in the prior fiscal year, was primarily due to lower capital expenditures in the current year related to our new Buckeye, Arizona distribution center, partially offset by the purchase of land for our next distribution center.

Current wording

The decrease in cash used in investing activities for the nine month period ended November 2, 2024, compared to the same period in the prior fiscal year, was primarily due to lower capital expenditures in the current year related to our new Buckeye, Arizona distribution center, partially offset by the purchase of land for our next distribution center.

Previous wording

Capital expenditures for fiscal 2024 are currently projected to be approximately $780 million. Our planned capital expenditures for fiscal 2024 are for investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, costs for fixtures and leasehold improvements to open new Ross and dd’s DISCOUNTS stores, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash.

Current wording

Capital expenditures for fiscal 2024 are currently projected to be approximately $760 million. Our planned capital expenditures for fiscal 2024 are for costs to open new stores and improve existing stores, investments in our supply chain to support long-term growth, including construction of our next distribution centers, investments in our information technology systems, and for various other expenditures related to our stores, distribution centers, and buying and corporate offices. We expect to fund capital expenditures with available cash.

Previous wording

Net cash used in financing activities was $830.0 million and $719.8 million for the six month periods ended August 3, 2024 and July 29, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase program and from dividend payments.

Current wording

Net cash used in financing activities was $1.5 billion and $1.1 billion for the nine month periods ended November 2, 2024 and October 28, 2023, respectively, primarily resulting from stock repurchases under our stock repurchase program, dividend payments, and the repayment of the$250 million principal amount of the 3.375% Senior Notes in September 2024.

Previous wording

Senior notes. As of August 3, 2024, we had approximately $2.5 billion of outstanding unsecured Senior Notes, of which $949 million is classified within Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended August 3, 2024. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Current wording

Senior notes. As of November 2, 2024, we had approximately $2.2 billion of outstanding unsecured Senior Notes, of which $699.4 million was classified within Current Liabilities on our Condensed Consolidated Balance Sheet for the period ended November 2, 2024. Refer to Note E: Debt in the Notes to Condensed Consolidated Financial Statements for additional information.

Previous wording

Other financing activities. In March 2024, our Board of Directors approved a new two-year program to repurchase up to $2.1 billion of our common stock through January 31, 2026. During thesix month period ended August 3, 2024, we repurchased 3.7 million shares of common stock for $525.0 million (excluding excise tax) under this program. For the six month period ended July 29, 2023, we repurchased 4.3 million shares of common stock for $464.9 million (excluding excise tax) under our previous, publicly announced repurchase program. During the six month periods ended August 3, 2024 and July 29, 2023, we also acquired 0.5 million and 0.4 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs, for aggregate purchase prices of approximately $71.7 million and $38.4 million, respectively.

Current wording

Other financing activities. In March 2024, our Board of Directors approved a new two-year program to repurchase up to $2.1 billion of our common stock through January 31, 2026. During the nine month period ended November 2, 2024, we repurchased 5.5 million shares of common stock for $787.5 million (excluding excise tax) under this program. For the nine month period ended October 28, 2023, we repurchased 6.4 million shares of common stock for $703.4 million (excluding excise tax) under our previous, publicly announced repurchase program. During the nine month periods ended November 2, 2024 and October 28, 2023, we also acquired 0.6 million and 0.5 million shares of treasury stock, respectively, to cover employee tax withholding obligations under our employee equity compensation programs, for aggregate purchase prices of approximately $86.1 million and $48.6 million, respectively.

Previous wording

On August 21, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on September 30, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March and May 2024, and $0.3350 per common share in February, May, August, and November 2023.

Current wording

On November 20, 2024, our Board of Directors declared a quarterly cash dividend of $0.3675 per common share, payable on December 31, 2024. The Board of Directors declared a cash dividend of $0.3675 per common share in March, May, and August 2024, and $0.3350 per common share in February, May, August, and November 2023.

Previous wording

For the six month periods ended August 3, 2024 and July 29, 2023, we paid cash dividends of $245.8 million and $228.8 million, respectively.

Current wording

For the nine month periods ended November 2, 2024 and October 28, 2023, we paid cash dividends of $367.5 million and $342.1 million, respectively.

Previous wording

We ended the second quarter of fiscal 2024 with $4.7 billion of unrestricted cash balances, which were held primarily in overnight money market funds invested in U.S. treasury and government instruments across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our bank credit facility, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, debt repayments, interest payments, common stock repurchases, and quarterly dividend payments for at least the next 12 months.

Current wording

We ended the third quarter of fiscal 2024 with $4.3 billion of unrestricted cash balances, which were held primarily in overnight money market funds invested in U.S. treasury and government instruments across a highly diversified set of banks and other financial institutions. We also have $1.3 billion available under our Credit Facility. We estimate that existing cash and cash equivalent balances, cash flows from operations, our bank credit facility, and trade credit are adequate to meet our operating cash needs and to fund our planned capital investments, debt repayments, interest payments, common stock repurchases, and quarterly dividend payments for at least the next 12 months.

Previous wording

Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility and a funded trust to collateralize some of our insurance obligations. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of August 3, 2024, February 3, 2024, and July 29, 2023, we had $62.4 million, $60.8 million, and $59.1 million, respectively, held in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash and cash equivalents.

Current wording

Standby letters of credit and collateral trust. We use standby letters of credit outside of our revolving credit facility and a funded trust to collateralize some of our insurance obligations. As of November 2, 2024, February 3, 2024, and October 28, 2023, we had $2.2 million, $2.2 million, and $2.6 million, respectively, in standby letters of credit outstanding. As of November 2, 2024, February 3, 2024, and October 28, 2023, we had $63.2 million, $60.8 million, and $59.9 million, respectively, held in a collateral trust. The standby letters of credit are collateralized by restricted cash and the collateral trust consists of restricted cash and cash equivalents.

Previous wording

During the second quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended February 3, 2024.

Current wording

During the third quarter of fiscal 2024, there were no significant changes to the critical accounting estimates discussed in our Annual Report on Form 10-K for the year ended February 3, 2024.

Previous wording

Future impact from inflation, interest rate changes, ongoing military conflicts and economic sanctions, climate change, pandemics, natural disasters, and other economic, regulatory, consumer spending, and industry trends that could potentially adversely affect our revenue, profitability, operating conditions, and growth are difficult to predict. Our forward-looking statements are subject to risks and uncertainties which could cause our actual results to differ materially from those forward-looking statements and our previous expectations, plans, and projections. Such risks and uncertainties are not limited to but may include:

Current wording

Future impact from inflation, interest rate changes, ongoing military conflicts and economic sanctions, tariffs, climate change, extreme weather, pandemics, natural disasters, and other economic, regulatory, consumer spending, and industry trends that could potentially adversely affect our revenue, profitability, operating conditions, and growth are difficult to predict. Our forward-looking statements are subject to risks and uncertainties which could cause our actual results to differ materially from those forward-looking statements and our previous expectations, plans, and projections. Such risks and uncertainties are not limited to but may include:

Previous wording

•Uncertainties arising from the macroeconomic environment, including inflation, high interest rates, housing costs, energy and fuel costs, financial and credit market conditions, recession concerns, geopolitical conditions, and public health and public safety issues that affect consumer confidence, and consumer disposable income, and shopping behavior, as well as our costs.

Current wording

•Uncertainties arising from the macroeconomic environment, including inflation and the price of necessities, high interest rates, housing costs, energy and fuel costs, financial and credit market conditions, recession concerns, geopolitical conditions, and public health and public safety issues that affect consumer confidence, consumer disposable income, and shopping behavior, as well as our costs.